Many startup founders have never hired or managed a bookkeeper before, so they don’t know what good looks like. If that sounds familiar, you’re not alone.
Many founders choose a bookkeeper who is the cheapest solution, since cash is so important in the early days of a startup. But this often leads to an expensive cleanup later on, because the books weren’t set up properly or there are errors.
Others hire off a billboard or ask their investors or friends for referrals. Some of these people have a recommended stack. Some just say what they’ve heard. Their recommendation or the name they’ve heard may not be the right fit for your business., and at the end of the day, you are accountable for choosing the right bookkeeper, not them.
Often, founders follow the path of least resistance. You wouldn’t hire a CTO or head of product because they were the first person you met. Instead, you would look for the person who’s the best fit for your needs.
But the accuracy of your financial statements carry reputational and fiduciary liability to the founder, so it’s just as important to find a bookkeeper who’s the right fit based on your industry, stage, and other consideration.
Here are some questions a founder should ask when choosing their bookkeeper.
Can you share the names of three companies in my industry you have worked with?
In addition to understanding numbers, your bookkeeper also needs to understand your industry. This is important because the foundation of accounting is the chart of accounts, which determines how you structure and view a business. Every business is different, so you want the right chart of accounts to start. Why three? It’s the smallest number that provides pattern recognition.
Can you share the names of three companies you have worked with at my stage?
Bootstrapped companies versus venture-backed companies have different need, so ask if they have worked with similar stage companies. Don’t be dazzled by big names in your industry, because if you’re a bootstrapped startup and the bookkeeper has mainly worked with more established, ventured-backed companies, they might not fit your current needs.
Should I do cash or accrual financials? Why?
Cash accounting recognizes revenue when it is received, while accrual accounting recognizes revenue when it is earned. It’s expensive to switch from cash to accrual accounting later, so you’ll want to get alignment on this from the beginning and set it up in the way that makes the most sense for your company.
Do you have experience with ASC 606 revenue recognition?
If you’re a software company, you need an bookkeeper who is well-versed in this revenue recognition standard, which was designed to remove inconsistencies in how businesses across different industries recognize revenue so that investors and others can compare apples to apples. Software companies need to comply with this standard, but it’s complicated and not intuitive, so if you’re running a software company, make sure your bookkeeper has experience in this area.
When should we close our books and what do you need from us to do that?
Some founders want fast financials. Some don’t care as long as they are done. Some wait until the end of the year just for taxes in the early days. Alignment of expectations is important, so make sure you and your potential bookkeeper agree on timelines.
Do you provide any expertise beyond bookkeeping?
Some founders just want financials for taxes. Some want insights, metrics, or projections. Some want a monthly call to review it together or advice on how to improve their business. Others might need help preparing for a fundraise or investor reports once they’ve raised money. If you’re expecting any of these extras, make sure your bookkeeper can provide them and ask about fees, as this might not be part of their typical scope of work.
Do you have experience with my technology stack?
It may not be a dealbreaker that your bookkeeper knows and uses your technology stack, but it can certainly make things easier. If they don’t have the experience, find out if they’re willing to learn or if they will require you to move to their preferred stack.
Looking for a platform that offers seamless collaboration between you and your bookkeeper? Puzzle is startup accounting software built by and for founders and finance teams. Learn more at Puzzle.io.